| When your primary plan of action doesn’t work, you need to have a backup strategy. |
When your primary plan of action doesn’t work, you need to have a backup strategy. This may involve switching gears from a retail sale to a rental or rent-to-own deal. It may also involve dropping your price, dropping your rent, or, if you are lucky enough to realize your mistake early, walking away from an earnest money deposit instead of closing on a bad deal.
If you already closed and your exit plan didn't work out, sometimes the only option is to bail out and cut your losses. It takes a big person to look in the mirror and say, “I made a mistake.” Too many investors let their ego get in the way and hold on longer than they should and the bleeding never stops. If it’s a retail deal, then drop your price, even if it means losing money. If it’s a rental, drop your rent low enough to attract a solid tenant. If your monthly carrying cost is $1,000 on a unit, it makes sense to drop your rent by $80 a month rather than have a vacancy. In fact, if you’re offering the property on a lease with option to purchase, you may consider dropping the rent below market and taking a monthly loss to make it up on the backend, assuming there’s enough equity to justify the monthly loss.
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| How to Save Up to 90% on Title Insurance |
If you have ever bought or sold real estate, you have probably paid for title insurance. What exactly is title insurance? Why do we need it? How can I save money on title insurance? These are common questions asked by real estate investors.
Whenever title passes, the seller usually gives a deed containing certain guarantees or “warranties” (hence the name “Warranty Deed”). The seller warrants that title is good, that is, no one will come challenge the integrity of the title. For example, if a deed that was passed before him was forged, all subsequent transfers are void. Other problems may be more subtle, such as a deed with an incorrect legal description or misspelled name. Any irregularities in the “chain of title” will place a “cloud” on the integrity of the title.
The Title Search
When you are ready to sell a property, a title search is performed by a title company or attorney. The title searcher follows the chain of title back about 50 years, tracing the ownership through deeds recorded in pubic records. The searcher also checks to make certain that previously recorded mortgages and other liens have been released. Based on documents found in public records, the title company or attorney will prepare a “title insurance commitment.” A commitment is a statement that based upon certain documents found by a search of public records, the company will issue a title insurance policy for a certain fee.
The Title Insurance Policy
The title insurance policy, unlike most insurance policies, covers past events. For example, the daughter of a previous owner claims that her father conveyed a deed while not mentally competent, the current ownership may be in jeopardy. The title insurance company will defend the claim and pay for any damages (usually the value of the property). The policy does not cover claims based on events that occur after the policy is issued. Furthermore, the policy usually contains numerous exceptions, such as claims based on information undisclosed to the title company. Thus, if you are aware of any potential problems that might lead to a claim, your failure to disclose this information to the title company will lead to a denial of a claim based on those events.
Ask for a “Re–issue” Rate
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| It amazes me how many people get started in real estate investing |
It amazes me how many people get started in real estate investing, only to fail when the going gets tough. As soon as someone discovers they can’t get rich in a week or two, they are on to the next “hidden guru” secret. It’s the same as weight loss - everyone talks about it, many try it, but few succeed. There are thousands of “get rich quick” and “get slim quick” gimmicks. No wonder both the real estate investing information and weight loss products industries make BILLIONS!
Weight loss isn’t easy... ask anyone who has tried it. However, the concept of weight loss is very basic - burn more calories than you ingest and your body will react accordingly. Unless you have a medical disorder, this formula works for just about anyone. Simple as it may be, the formula is HARD, meaning it takes a lot of DISCIPLINE AND HARD WORK. So, the weight loss industry has offered us thousands of ways to make it easier. Many of these solutions do work, but they only work if you put forth effort.
Now, let’s start with the premise you don’t need any of these “solutions” to make real estate OR weight loss work for you. You can eat less calories, go walking or jogging every day and you will lose weight. But, having knowledge of the caloric content of different foods is relevant. Also, for many people, knowing the carbohydrate content is relevant. Having the advice of a physician, dietician and personal trainer will help you prevent injuries and maximum your effort.
Same principle applies to real estate - you can go out and make hundreds of offers to motivated sellers and find a good deal. However, having information about how to solve the seller’s needs and construct an offer will help. Having an attorney, real estate agent or “guru” to assist you with constructing the offer and the paperwork will make it easier. Having advice from other people who have already done hundreds of deals will also make it easier for you to learn from other people’s success (and failures). However, whether it’s weight loss or real estate, the bottom line is not just knowing, but DOING. You can’t blame the diet if you don’t stick to it. Many people have successfully lost weight using the ZONE, WEIGHT WATCHERS, ATKINS and other similar plans. Many people have succeeded with the famous “guru” plans, but many have failed, likely because they didn’t give the required effort, NOT because the plan isn’t effective.
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| Investors often misunderstand the phrase market value |
An appraisal is a certification by a licensed professional that a house is worth a certain amount based on comparable sales. It is, however, an opinion of value based on one person’s analysis and experience. The actual “market value” is the amount a buyer is willing to pay and for which a seller is willing to sell under normal circumstances.
Investors often misunderstand the phrase market value. Here’s a good way to understand this: Imagine that a home has been on the market for several months. Typically, homes in this particular market sell within a few weeks. But if the seller doesn’t receive a single offer, you have to assume the property is overpriced. Several factors may contribute to the problem, including the condition, location, and layout out of the house. However, all these get factored into the asking price. In short, if the house is priced right for its location, condition and features, it will sell within the same time frame of other houses in the neighborhood.
Many times the real estate broker takes a listing at a higher price than “market” with full knowledge that the home is listed too high. Sometimes brokers do this to win the listing over competing brokers by telling sellers what they want to hear. Like the barber who says, “It’s a great haircut,” they’ll say, “I’ll get you a higher price.” Most often, having a price that is higher than market is the seller’s fault (rather than the broker’s) because the seller has unrealistic expectations about the property’s value.
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| Passive income from real estate | |
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Working for a company for 25 to 30 years to have a nice pension is the most risky way to retire. This is because the person does not have power to control his own earnings. The best way is to have a business like real estate or any trade of his own.
Real estate can fetch a person a lot of income when he retires. But he ahs to start early. If one manages to get a property of say 15 rental apartments after accumulating a lot of money then, one can have 30 years of mortgage using this property. When a person retires approximately at the age of 60 years, the tenants has finished paying off. So you get back all the money you once invested.
If a person charges $1,000 a month for a single rental property then, his summation of passive income comes around to be $15,000. So annually, a person begins earning around $180,000. Hence based on market economical conditions one can even raise the amount of rents.
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